Question

As you know from your pre-class work, W.T. nee wirom your pre-class work. W.L. needs to determine how much he'll charge me customers of My Assistant. Keep in mind that Assistant. Keep in mind that he'll need to (1) cover costs and (2) earn a profit so he can be paid. Part 1 aiready done quite a bit of work on projected costs for My Assistant, so pull out your notes from Class #2. To recap, W.T.'s planning on the following: Newspaper ad Social media manager Payment collection Gas $120 per month $100 per month: $1 per job scheduled $0.75 per job $4.00 per job Considering his analysis of similar services and to keep things simple, W.T. plans to price all jobs the same and charge $15 per job. Because of this flat rate, he anticipates he'll likely need to create different types of "jobs". For example, purchasing a list of items at the grocery store would be one job, while a bundle of 2-3 small errands such as picking up dry cleaning and prescriptions, might be considered one job. We'll deal with those details later. For now, assume that all jobs are priced at $15 each and all have the associated variable expenses listed above.

Answer 1

(1)	Margin of Safety:
		In Units	In Dollars
	Budgeted Sales	40.00	$            600.00
	Break even Sales	23.78	$            356.76
	Margin of Safety	16.22	$            243.24
	Calculation:
a	Budgeted units (Given)	40	Jobs per month
	Sale price per unit (Given)	$                         15.00
	Budgeted Sales	$                       600.00
b	Break even sales(Unit) per month =
	Fixed Cost per month:
	Newspaper ad =	$                       120.00
	Social media managaer =	$                       100.00
	Total	$                       220.00
	Contribution per unit:
	Sales Price	$                         15.00
	Less variable expense	$                           5.75
	Contribution per unit	$                           9.25
	Break even sales(Unit) per month =	Fixed Cost per month/Contribution per unit
	=	23.78	Jobs per month
	Break even sales($) per month =	Break even sales in units*Sale price per unit
	=	$                       356.76
c	Margin of safety sales =	Budgeted sales-Break even sales
	Budgeted Sales	$                       600.00
	Break even sales	$                       356.76
	Margin of safety sales	$                       243.24
	Margin of safety sales in units	16.22	Jobs per month
(2)	Margin of safety(%) =	(Budgeted sales - Break even sales)/Budgeted sales
	Budgeted Sales	$                       600.00
	Break even sales	$                       356.76
	=	40.54%